Value Creation vs Value Extraction: Why not both?
There’s not a C-level in the world that will tell you they’re against creating value.
Getting your brand recognised, improving its reputation and making sure you’re getting talked about (in a positive light, ideally), have long been key concepts for most businesses and it’s not rare to hear the expression “consistency is key” around the office, regardless of company size, mindset or what you’re selling.
But in the shadows, dark forces plot against it.
While I might be over-exaggerating it slightly the fact is, in recent years, business models have radically shifted towards value extraction, leaving many of those concepts behind. Brand identity, which was once glorified when we talked about Apple or Microsoft, has been replaced by revenue and growth as the main topics of conversation.
I’m obviously not trying to say that making money is bad for business but, the truth is, we have been gradually overlooking the impact value creation has on a brand and forgetting why a few years ago there used to be so much brand awareness about… well, brand awareness.
Today, if you’re trying to build up a rep with your neighbours, you’ll fix the mailbox and wait for that sweet, instant gratification to kick in. What you’re forgetting is that if you start helping around the building every Tuesday for a couple of years, you’ll become a celebrity around the block.
That’s exactly where branding comes in.
A solid brand strategy goes well beyond getting you the recognition you’re looking for (and think you deserve). It avoids having to explain to your customers, a few years down the line, why you haven’t been paying attention. When this benefit is misunderstood or voluntarily stays out of your value extraction strategies because you don’t feel like dealing with the commitment, it can shake the very foundations you’ve been building your brand on. On top of that, the advantages far surpass just avoiding confrontation with your clients. It enables your marketing, drives your sales calls, gives you the air time to tell the world who you are and, perhaps the most important branding KPI of all time, sells tshirts (might be slightly over-exaggerating here as well)!
While you can have a value extraction based model so strong that it allows you to turn your ship around whenever you need, that takes enormous amounts of revenue and good (or paid) publicity and you risk losing it all over something as small as picking your brand ambassadors wrong.
But let’s look at examples we can all identify with, shall we?
Live long and prosper or prepare for winter.
When you think of brands with a business model focused on value creation, two franchises that got generation after generation of fans hyped before any new release come to mind- Star Wars or Star Trek
We could talk about how even business models based on value creation eventually have to adapt to culture or technology to survive but instead, let’s go over how one of the main cinematic references of the last decades was completely decimated after shifting to a value extraction model all of a sudden — Game of Thrones.
Game of Thrones had the potential to dethrone or at least go head to head with some of the top franchises we’re so quick to name. Fans would stay up to watch new episodes, it was getting talked about the same way you’d ask your friend if he had watched the game last weekend and you even were starting to see the occasional diehard fan wearing a “House Lannister” tshirt when you visited your local shopping mall. It was part of our lives.
It was backed up by recently launched streaming services and social media platforms and offered a much more appealing 10 “short” episodes a season, rather than the long 3 hours at the cinema our shorter and shorter attention spans are struggling with these days.
Yet, the moment the source material dried out, seasons got shorter, the story telling got much, much sloppier, and the fanbase was ignored. You can argue the show got too big to maintain but the revenue it would drive over years of selling it to an institutionalised fanbase (not to mention sequels and spinoffs) would far outweigh its costs.
The franchise moved from the “next big thing” to “the one that got away” and its once hardcore fanbase of millions of avid watchers, today has issues about even considering rewatching the series.
Wherever you go, leave a trail of breadcrumbs.
Building a brand takes time, vision and, to be perfectly honest, a trail of breadcrumbs so you don’t get lost along the way.
Awareness and recognition require a mindset that despite being not all that rare amongst marketers, is completely overlooked as more and more brands turn to value extraction in order to burn bright (and fast). As these models become more common, branding becomes a synonym of something that takes way too much work, way too much time and gets in the way of your goals. However, putting people first does not automatically send your profit plummeting to the bottom of your priority list.
Brands that enable their customers are brands that can better communicate with them when you need that bridge to drive attraction, promote your new launch or share the positioning you spent 18 months building.
It allows you to serve your community better. It allows you to get closer.
While the benefits you gain from brand recognition can often be diluted in time, do not forget the remaining cogs in the wheel are focusing on sales and, with a safety net that makes sure you do not lose your customers’ trust, you avoid the devastating effects that one bad review has on your business. Especially when your business relies on the social marketing loops your community becomes more proficient at dealing with everyday.
Driving revenue through value creation is a long and arduous journey but it does just that. Once it happens, you’re not going anyway anymore.
